Pfizer: A Focus On Intellectual Property

Editor: Please provide us with a brief introduction outlining your background, and specifically your role at Pfizer.

Looney: By way of background, I have a PhD in chemistry from Columbia University and a law degree from New York Law School. I spent about seven years working in IP at boutique patent law firms in New York City and joined Pfizer in 2000. With respect to my current role at Pfizer, I am responsible for overseeing our patent group that provides support to our oncology research and business units. As you may know, we have a pretty extensive research and commercial effort in oncology. The team that I lead is responsible for procurements of patents around the world and adding them to our global patent portfolios. A significant piece of our work involves client counseling regarding licensing and acquisition. Additionally, I also provide oversight for our Japanese patent group. I am also involved in providing advice on policy matters relating to the U.S. patent system for our policy team in connection with legislation being considered by Congress.

Editor: What shortcomings, if any, do you see in the America Invents Act (AIA), now that it has been fully operational since March 2013? Have you noted that small entrepreneurs who need more time to raise capital than larger companies have been disadvantaged?

Looney: It’s important first to note that both Pfizer and the industry supported AIA. Overall, I believe it’s operating well, although not all aspects of its provisions have been through a full cycle. It takes awhile after a new law is implemented for it to be fully tested.

Having said that, the AIA has modernized our patent system by harmonizing U.S. practice with that of the rest of the world. It also provides some new review mechanisms for patents, including the addition of post-grant reviews for issued patents. This provides an opportunity to request a review if you believe there are some issues with a granted patent. Another helpful provision is the addition of the process called “supplemental examination,” which permits a patent owner, once a patent has been issued, to bring issues back to the patent office to seek additional clarification.

With respect to areas where there are still shortcomings and areas for improvement, one relates to inter partes review, which is basically a new proceeding conducted at the patent office before the Patent Trial and Appeal Board, also referred to as PTAB. Inter partes review is limited to challenges of patentability only on the technical grounds of novelty and obviousness using prior art consisting of patents or printed publications.

It is interesting to note that the patent office reports that the number of inter partes reviews requested since the enactment of the AIA was 766. The monthly number of inter partes reviews being filed is increasing, which reflects a trend that third parties who want to challenge particular patents are doing so before the patent office. However, it’s still small relative to the number of patents that are issued every year. For example, in 2013 the patent office reported that just over 275,000 patents were issued. I expect that over time, as people get more familiar with the AIA, we will see that number increase.

In particular, with respect to inter partes review, one of the areas that gives us some concern is how the Patent Trial and Appeal Board is going to review patent claims. The standard they are using is the broadest reasonable interpretation in light of the patent specification. I think there’s a belief that since we’re dealing with an issued patent and not a patent application, the standard that the PTAB should be using is what a district court would use.

The alternative to challenging a patent using the patent office through the inter partes review process is to go to a district court. A district court in dealing with disputed patents reviews the language of the claims and specification, a description of what has happened before the patent office and any extrinsic evidence that would support the intrinsic evidence.

Inter partes reviews and also post-grant reviews are being seen as potential alternatives to using a district court. Because using the same standard in both forums would be expected to give more consistent results, this is an area that could certainly use some improvement.

With respect to the ability of small entrepreneurs to raise capital, I am not aware that the AIA has created disadvantages. In fact, many of the provisions of the AIA are supportive of small business including the certainty from the first inventor to file system, introduction of micro-entity fees for patent filings, and other patent resolution procedures that will likely be more cost-effective than traditional patent dispute resolution processes.

Editor: What improvements to patent prosecution have come about as a result of the AIA?

Looney: Clarity is provided under the first inventor to file system. It’s very important to encourage inventors to file their inventions when they are ready for patenting. This ensures the exchange of patent rights for the disclosure of the invention to the public, and dissemination of knowledge and information that can support further innovation. Additionally, for third parties who may have an interest in obtaining or licensing a patent, having the certainty of knowing who is going to get the patent supports their decision to invest without having the risk that the rights could move to a different party at some point in the future.

The other improvement to the patent prosecution system has been the fact that third parties are now permitted to submit printed publications to the patent office during the prosecution of a patent application. This will certainly help patent examiners to make sure they’ve got the most pertinent art for review prior to issuing a patent. Parties are now taking advantage of this opportunity to file pre-issuance submissions with the patent office reporting that just over 1,200 third-party submissions were made by the end of 2013. Again, we are seeing these new processes starting to be utilized by various parties, and that’s certainly good.

Another area that still requires attention is how the patent office deals with a very significant backlog of patent applications. Today, there’s a very useful tool at the patent office called the data visualization center, where they indicate that over 600,000 patent applications are still awaiting examination before the patent office. That’s a tremendous number of patent applications and patent applicants still waiting to hear from the patent office whether or not they will ultimately receive a patent for their invention. The patent office has diligently been working to reduce how long it takes to actually review and examine a patent.

Part of the way they’ve been doing this – and I certainly applaud them for this -- is increasing the number of patent examiners. The patent office is taking the appropriate measures, but it faces the challenge that the average number of filings per year in the U.S. is anywhere from 400,000 to 500,000 per year. The trend in the U.S. where we are seeing more patent applications being filed is also mirrored throughout the world.

Editor: The Obama administration has recommended that measures be taken to forestall lawsuits by non-practicing entities (patent trolls). Have you noted that any slowdown in their pursuit of claims of infringement has occurred? What is the logical solution to this problem?

Looney: Patent trolls are not a significant issue per se for pharmaceutical companies. They tend to be more of an issue in the software and electronics industries. Because they do occasionally affect our industry, we have some concern. It has certainly been good to see the Obama administration looking at measures to forestall some of these lawsuits by non-practicing entities. We believe it’s important to deter these practices, but we also want to make sure there aren’t unintended consequences for other patent owners who are legitimately trying to enforce their rights.

One of the areas that needs attention – and I think is getting some attention – is the quality of the patents that are being issued. It’s very important for the patent office to ensure that the patent applicants are meeting all of the standards required to obtain a patent. As I have previously mentioned, it is good to see that the AIA provides additional opportunities for third parties to intervene with respect to these review systems.

One solution we are thinking about is the standard that’s currently used by courts, to award attorney fees to a defendant. It is important to give judges more discretion to award attorneys fees to a defendant if they believe the litigation has not been brought in good faith. Having said that, I don’t think there’s any easy fix to the issue of non-practicing entities’ lawsuits. The AIA gives defendants some options to challenge and test some of the contested patents prior to ending up in the courts.

Editor: What are the best tribunals for settlement of IP disputes?

Looney: There isn’t one best tribunal for settlement of IP disputes. This is really a strategic decision for a company depending on the strength of the patent that you are challenging. The arguments supporting your position, the costs, which are obviously an important consideration, and the timing – since litigation in a district court can take many years – and also the ability to appeal a decision all must be taken into account.

Clearly, the traditional tribunal for IP disputes has been the courts. PricewaterhouseCoopers reported that in 2012 there were just over 5,000 patent infringement lawsuits filed, which is an increase of 29 percent compared to the previous year. Courts offer a well-defined precedent and pathways for parties to work through patent issues. Of course the cost and the time required to pursue a lawsuit are significant, and it’s very disruptive to the daily and future planning for businesses. It’s not good for innovation to have new products having a cloud hanging over their development as the business awaits the outcome of a lawsuit. As a result, many businesses eliminate that uncertainty by settling lawsuits because it is difficult for businesses to put a significant investment at risk while they await a court process that can take anywhere from two to five years or longer for resolution.

As I noted earlier, the patent office is offering alternatives to judicial litigation with respect to inter partes review and post-grant reviews. This I expect will get more utilization with time as patent practitioners get experience with the processes. Through the end of 2013, there were almost 800 inter partes reviews filed. However, this is still relatively small compared to the number of patent infringement lawsuits that are filed in district courts. It’s going to take time for organizations and companies to get more familiar with the system and understand how it works.

It is also worth noting that one useful reference point is in Europe, for example, where they have had a long history with respect to what we call opposition practice. Once a patent is issued in Europe, third parties have the opportunity to challenge the patent by opposing it. It’s akin to our post-grant review system. That system has been in operation in Europe for a number of years and is certainly widely utilized by many companies in many industries and is believed to work well. I think the hope is the U.S. system for post-grant review will also see such success. Other areas and options for resolving IP disputes obviously can be arbitration, however I think it’s important to note that one size does not fit all. However, it’s a very positive development to see the patent office offering its alternatives to the already distinct tribunals that we have in place.

Editor: Balance sheets fail to reveal the true value of IP assets. What measures should corporations follow in taking inventory of their assets from a strategic standpoint and in measuring their importance? Would yearly appraisals be in order?

Looney: At Pfizer, we do a yearly review of all our patents and patent applications to determine the value they confer on the products we’ve commercialized and on those products in development. We file patent applications in probably over 100 countries in the world for some of our products in development. The yearly assessment enables us to manage our intellectual property strategically. If a patent does not have value to us, does it have strategic value to someone else and are there opportunities for it to be licensed or sold? In our industry, the portfolio of drugs is very dynamic, with new products entering and leaving the portfolio at various times. Maintaining a large patent portfolio involves significant use of our capital as well as attorney time. I believe that many companies do not review their portfolios frequently enough to determine whether or not a piece of IP really confers value or provides an advantage over the competition.

You also need to think about the type of IP. What type of patent or what type of patent claim is it and how would you be using it? Not all patents are created equal. They confer different types of benefits depending on the type of patent claim you might have. In short, it is important for companies to test their assumptions about whether an IP asset is providing value to the corporation and if it’s not, it’s time to consider alternatives such as creating value by selling the asset or licensing it to another party.

Editor: What is the impact of the Myriad decision on biotech and pharmaceutical industries?

Looney: The Myriad case is in some ways relatively straightforward in that it held that isolated genomic DNA is not patent-eligible because it’s a product of nature. However, many other aspects of biology remain open to patenting. It’s important to note that the Supreme Court was careful in its decision to point out that the patentability of several other types of patent claims are not impacted by the Myriad decision, including method claims. For example, that could mean methods of treating a particular disease, claims to application of knowledge about the genes, and claims to synthetic DNA that was created in a lab. So when practitioners are looking at this and companies are thinking about patenting post-Myriad, it is important for companies to submit different types of patent claims related to their compounds, to their use, and to its manufacture. It is also important for companies to emphasize the therapeutic effects if they are dealing with a naturally occurring compound. There are still ways in which organizations can continue to protect IP with respect to a new compound in the way they write their claims. At this point in time, I don’t think Myriad has had a very significant impact on the industry.

Editor: Where does the industry stand in relation to the Biologics Price Competition and Innovation Act (BPCIA) as it relates to patents and drugs under development?

Looney: The BPCIA has unique aspects with respect to patent litigation that provide challenges for both the reference product’s sponsor (the entity that owns the biologic) as well as for biosimilar applicants. One of the challenges for a biosimilar applicant is identifying the patents that protect the reference biologic drug. There is no equivalent in the BPCIA to the orange book for small molecules maintained by the FDA that lists patents associated small molecules. A small molecule generic manufacturer can review the orange book to identify the patents that are relevant to their ability to commercialize a generic product in the future.

As a result, what we are seeing is that biosimilar applicants need to conduct their own searches to identify the patents for a reference biologic drug and also identify any patents that a pioneering drug company has exclusively licensed for that drug. However, it certainly is something that is doable but does take time and effort to identify the relevant patents.

Once the applicable patents have been identified by a biosimilar applicant, they need to evaluate the scope of each of these patents and develop a strategy to ultimately ensure they have clearance to operate and that they have the ability to proceed to market in the future.

On the other hand, with respect to the brand name drug companies that own these molecules, they should evaluate their patent portfolios and look at ways in which they can increase value by ensuring that key patents are granted, identifying other patent opportunities for a product, or identifying patents they may want to license that might add greater value to their drug.

In addition, there probably will be a focus on the patenting of new processes, key formulations, and new indications for biologic drugs by the brand name drug companies. We may also see some brand name drug companies using some of the processes under the AIA, such as supplemental examination, to have issues reviewed again before the patent office.

Additionally, the patent resolution process is a complicated process. It is also, from a time perspective, characterized by multiple steps with short time frames. For both parties, both the owner of the drug and the entity that would like to make a biosimilar of the drug, it is important that they do a significant amount of preparation in anticipation of the potential for future litigation. This is uncharted territory for both the biosimilar applicant and the reference drug sponsor. It’s an evolving space, and it will take a number of years for a total understanding of how well the system works, and what the issues are. Litigation involving the interpretation of the BPCIA will provide more guidance for bringing biosimilars to the market.

Editor: Did you have anything you wanted to add?

Looney: Yes. In closing, with respect to the AIA, it is a law that is promoting and enabling innovation, and that’s a positive thing for both large and small companies. It’s important to see the patent office providing alternative mechanisms to have patent disputes adjudicated in a more cost-effective and timely manner.

With respect to small organizations, the patent office has been making an excellent effort to ensure they can access the patent system easily by reducing its fees. It has been looking at ways to get closer to its users by hiring new examiners and by expanding its footprint to include satellite offices in Dallas, Denver, Detroit and Silicon Valley. This is a positive development and a good strategy by the patent office.